| Do you ever get the feeling that even in this so | | | | The interest rates on short term notes that individual |
| called economic recovery, we are whistling past the | | | | countries issue are escalating to the stratosphere, |
| graveyard? What's changed? I'm afraid that nothing | | | | creating a situation where interest rates on short |
| has changed. | | | | term notes exceed long term rates, which equates |
| The only way that this recovery happened is by the | | | | to big trouble - usually a default by the country, |
| influx of billions of dollars worldwide both to | | | | which means that they are going bankrupt - and |
| consumers and businesses, encouraging everyone to | | | | someone has to bail them out. |
| continue living beyond their means by using credit. | | | | These high interest rates on notes result in bond |
| Where did the money come from? We loaned our | | | | investors protesting a country's inflationary monetary |
| way out by increasing our national sovereign debt, | | | | or fiscal policies (living on credit). They protest by |
| and again had to rely on credit to keep things going. | | | | selling the particular country's bonds they might be |
| I can't say that this was wrong or misguided. It was | | | | holding. This causes the bond's price to drop, but the |
| a choice. Either we could have had an immediate, | | | | yields to rise, which increase the borrowing costs of |
| total collapse of the economy, a 25% unemployment | | | | the particular country. This acts as a policeman to |
| rate or greater, and a run on the banks causing an all | | | | keep countries from overspending and over |
| out depression. Or, we could put off what we | | | | borrowing, unfortunately, as the yields (interest rate) |
| eventually have to face - that we are living way | | | | increase, the bond prices decline, therefore, when a |
| beyond our means. | | | | country gets in trouble, the trouble escalates swiftly. |
| This time, however, the credit was taken on by the | | | | But how long can the bailouts continue before |
| government. No problem, right? We'll increase our | | | | everyone is broke? Eventually, nobody will be there |
| national (sovereign) debt a little and things will be | | | | to bail anyone out anymore. If Greece can't get the |
| back to normal. Not so. The house of cards is about | | | | EU to bail them out, and Greece is a very small |
| to collapse. The international credit bubble is about to | | | | country, how would the UK or the US get help? And |
| burst. | | | | if Greece goes bankrupt, the ripple effect could |
| Greece is the shot across the bow. Greece is broke | | | | cause other EU nations to default leading to even |
| because of deficit spending. Their credit bubble has | | | | larger countries, as sovereign debt becomes |
| burst. With their short term government notes now | | | | unsustainable and the banks that are stuck holding |
| paying out 13%, which is unsustainable, the only way | | | | the loans and notes either go under or require more |
| that they can get enough money to keep their | | | | bailouts. |
| country afloat is to beg for assistance from the E.U. | | | | In other words, the yield (interest) on national notes |
| And Germany is balking. | | | | (how countries get credit) would be so high that it |
| Again, more bailouts? This time national bailouts? | | | | would strangle the country financially, and as each |
| Germany says no, unless perhaps Greece takes | | | | subsequent country fails, perhaps Spain, Italy, Ireland, |
| draconian measures to reign in costs, akin perhaps to | | | | and Portugal next, the financial as well as the |
| our cancelling Social Security, Medicare, most | | | | psychological effect would be felt worldwide. |
| government programs and government jobs, and | | | | This is all going to happen in the near future, and this |
| gutting the military. That might solve the financial | | | | time there will be no bailouts. Everyone's broke. |
| problem, but the country and its government would | | | | Those insisting that capitalism stands on its own two |
| fall apart because of populist unrest. | | | | feet without government intervention will get their |
| So why not just let Greece sink? Because if Greece | | | | way, and everything will go back to square one - if |
| sinks, Greece might just be the first card to topple in | | | | you don't have the cash, you don't buy, and if you |
| a house of cards where almost every country in the | | | | don't buy, businesses fail, and if businesses fail, banks |
| world becomes insolvent because of living beyond | | | | fail, and then there is a long, painful depression until |
| their means. | | | | people and countries learn to live within their means. |